LIC may once again enter the stock market at the end of the year to increase its public shareholding.
The central government is considering selling a stake worth $1-1.5 billion (Rs 8,800-13,200 crore) in LIC by the end of the year. Road shows are likely to take place in the next few weeks. He said that this step is part of the government’s effort to increase public shareholding to 10 percent as per SEBI instructions. The government had raised Rs 20,557 crore by selling 3.5 per cent stake in LIC through IPO in May 2022, which is one of the largest share sales in India.
To meet the minimum public shareholding limit, it will have to sell 6.5 per cent more stake by May 16, 2027, the current value of which is $4.2 billion or a little more than Rs 37,000 crore. The government currently holds 96.5 percent stake. Sources said that the company is considering selling 6.5 percent stake in parts within the deadline, but it will be sold gradually.
Decision will be taken on the demand of investors
He said that this has been done so that the share price does not fall and the existing shareholders are not affected. A merchant banker aware of the matter said that the stake sale will be done in several phases and we expect the first phase to be done before the end of the current quarter.
Since July 3, the share price of LIC is trading below the IPO level of Rs 949. On Tuesday it closed at Rs 900.7 with a slight gain. After which the market cap of the company became Rs 5.7 lakh crore. The media report quoted sources as saying that the Department of Investment and Public Asset Management, which is handling this process, has intensified discussions to finalize the exact timeline and quantity of the next stake sale.
It is also in the process of deciding how to pursue this transaction through a qualified institutional placement (QIP) or offer for sale (OFS). A source said that this decision will be taken on the basis of demand from investors in the road show to be held in the coming weeks. A senior government official said that talks are going on on this matter, but no decision has been taken yet. He said that it would be too early to make any comment in this regard at this time.
SEBI had extended the deadline
In May 2024, LIC got a three-year extension from SEBI to meet the 10 per cent public float requirement. LIC has to fulfill the requirement of 25 percent public shareholding by May 2032. The regulator has extended the deadline for many large institutions, including public sector financial institutions like banks, to meet the mandatory 25 per cent public float requirement to avoid the risk of excess supply of shares at any time.
Amit Khurana, head of equities at Dolat Capital Markets, said in an ET report that LIC should have no problem in finding buyers for its excess shares due to strong government support and its leading position in the market. Although there are some concerns about margin erosion after the announcement of the new GST, LIC will find buyers for its shares among both institutions and retail investors.
After major changes in GST on September 22, 18 percent duty on personal health and life insurance premium was abolished. This means that insurance companies cannot claim input tax credit on the related operational expenditure.